My plan was 'prepaid' in that I purchased 'tuition credits' lump sum in 2001. It was called the 'Guaranteed Tuition Fund' or something like that and it was sadly shut down to new contributions in 2003. However, I did speak to them today and they said I could still use it to purchase books or pay for room and board. They also mentioned that you DO NOT have to file the 1099-Q as several have stated (although they seemed a little perturbed that i kept asking them tax related questions LOL)....just keep the details around to prove you had legitimate expenses if you are audited is what they said (again, same as stated many times in this thread).
I also looked up some of the room and board stuff and including room and board charges even when living at home also seems legit - and the colleges will provide cost guidance on their COA statements even for commuters..more than enough there to cover the $4000 taken away to claim the AOTC.
It still seems odd to me, but perhaps the best solution in this case is indeed to DO NOTHING (ie NOT file the 1099-Q on my daughters return). Can't get more simple than that! Then I'll buy the AuditProtection with TurboTax when I file the return so at worst I have to submit some letters as proof.
I still think it would be helpful if someone could confirm the 'form' entries I came up with and help validate that there is a flaw in TurboTax. Someone else could still find this information helpful.
I'm going to finish these up, submit, and hope for the best.
Many thanks again to the fine folks who provided feedback on this issue.
